Pennsylvania Home Buyer

Mortgage programs in Pennsylvania

I know all this mortgage stuff can be overwhelming. There's an FHA mortgage, a conventional mortgage (whatever that is), USDA, and the Veteran's mortgage.

So which mortgage is "right" for you? Let's break it down.

The FHA loan for PA home buyers

FHA logoI read somewhere that approximately 50% of all mortgages currently originated are based on FHA financing. Why is that? The reason is that an FHA mortgage has very generous underwriting guidelines (rules). The minimum down payment is only 3.5%.

Pretty good, and the seller can pay up to 6% of the sales price toward the buyer's closing costs. Once again, the seller CAN pay up to 6% of the sales price, however, the seller is NOT REQUIRED to pay the buyer's closing costs. Now assuming the seller is willing to pay the closing costs, the home buyer only needs to pony up the 3.5% down payment.

So how do you cover that? The down payment can be "gifted" by a family member. So let's say, you're purchasing a $200,000 home and the seller agrees to pay all of the closing costs that add up to 6% of the sales price; that leaves the down payment of $7,000 ($200,000 X 3.5% = $7,000).

If dad and mom (reluctantly) gift you $5,000 and brother and sister gift you $1,000 each, you are now able to buy your dream house. An FHA mortgage is a good choice for little cash outlay at closing. Read more about the underwriting guidelines and mortgage limits on the FHA page.

What is a conventional loan and how does it work?

Fannie Mae aqnd Freddie Mac logoWe'll call this your father's mortgage. At one time, home buyers would go to their local bank to apply for a mortgage and the banker would require a 5, 10,15 or 20 percent down payment. In short, if the mortgage is not an FHA, VA or USDA mortgage, it's a conventional loan. These loans are underwritten to the Fannie Mae and Freddie Mac guidelines.

The conventional loans require a minimum down payment of 5% and the seller assist is not as generous as FHA, VA and USDA loans, but a conventional loan is superior to the alphabet loans if you have a down payment of 10% or greater. Read more about the underwriting guidelines and mortgage limits on the Fannie Mae & Freddie Mac page.

PA USDA mortgage (also known as the Rural Home Loan Program)

USDA logoI know it sounds a little strange, but the Department of Agriculture offers a mortgage program Zero down payment, that's right, no down payment. And the seller can pay up to 6% of the closing costs. Again, the seller is not required to pay the closing costs, but they can. If the seller is able to pay all of the closing costs and there's no down payment, it is possible to purchase the home with nothing out of pocket. Now for the down side.
The home must be located in a designated rural area. The USDA uses site maps to determine eligibility. Generally, metropolitan areas are excluded. There are income limits. Read more about the underwriting guidelines and mortgage limits on the USDA page.

Veteran's Administration logoThe VA loan for Pennsylvania veterans

The VA loan is a fantastic home loan. No down payment is required for a VA loan. The seller is permitted to pay ALL closing costs. There is no monthly mortgage insurance premium. And, the VA discourages excessive junk fees. Read more

How much does it cost to buy a house in Pennsylvania?

Use the PA mortgage calculator to estimate the down payment, closing costs and monthly payment for FHA, VA, USDA & conventional loans.Closing cost calculator

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